Budget 2021: Mortgage guarantee to help buyers with 5% deposit

[Scam]

It is flawed if you live in the south

Right. Exactly my point.

but that is where H2B is potentially a more appropriate scheme

Except for numerous stipulations that would make it unworkable for a lot of people. The max price for London didn't match the max household income, I wouldn't go anywhere near a leasehold property or one you have to pay ground rent on. And then you have to pay interest on the loan. The list goes on. It's not a good scheme and everyone knows it; https://www.ft.com/content/b0863064-3b72-11e9-b72b-2c7f526ca5d0

It is funny how "i'm alright jack" this forum is consistently.

That's ironic coming from you.

maybe you shouldn't be buying a 550k property in the first place.

Who said I'm buying a 550k property?

Haven't you been moaning about landlords for years? Now you want to spend seemingly over half a million on a property? It seems like you could have likely bought much sooner instead of renting in a fancier area than you could afford but simply wanted to "have your cake and eat it" so to speak.

Pssst, the average price of a property in London is 500k. Shocker as someone is spending over the arbitrary 450k on the LISA scheme... And I live in zone 3. It's nice, and safe, but not fancy by any stretch of the imagination.

This new scheme applies to up to 600k AFAIK

It doesn't. But H2B does. So wait, are you saying it's "acceptable" for someone to buy a £599k property with H2B, just not with a LISA? Just want to be clear how you're trying to judge here. Thanks

You didn't reply to the previous post earlier in the thread:

The problem with trying to get a mortgage in the South East/London with a 5% deposit is that the bank will only lend you up to a certain amount. With a 5% deposit you'd probably have to have two householders earning big 6 figures to get them to lend you enough for the average FTB property.

Would love to see the response from the MP

Ok, omitting the intro/signoff for obvious reasons;

We are sorry to hear of this situation and appreciate the frustration brought about by the restrictive limitations of the Lifetime ISA in the face of an expensive property market in London. You raise some very important points and it is vital that this is brought to the attention of the Government.

In order to help, *my MP* has made a formal enquiry with the Economic Secretary to the Treasury, John Glen MP, raising your concerns and asked him to look into this matter. Although this may take some time, we will certainly be in touch as soon as we have received a response from the Government. We hope you’re keeping safe & well in the meantime,

Yours sincerely,

Oh and regarding misselling it's not my words; https://www.telegraph.co.uk/investi...bolish-lifetime-isa-says-new-treasury-report/ (I had a pdf of that previously, can't find it now)

 

[413x]

It's bad not because of those reasons, but because it's a failed attempt at a bandaid on a much bigger problem (housing crisis) that they don't want to address. But yeah, being mad over the £450k limit makes no sense. The withdrawal penalty and price limits are also pretty well advertised so it's not like people didn't know what they were signing up for.

And if you can't use it for house deposit, you can use it for retirement anyway. People can pretend like it's a tax-free pension.

Yeah agreed it just props prices up etc. But the actual product was fair. One of those things where you have to play the game presented to you

 

[HACO]

Yeah agreed it just props prices up etc. But the actual product was fair. One of those things where you have to play the game presented to you

This year I moved mine into my ISA knowing that I'll definitely be purchasing above the £450k limit. Should have just invested that into my S&S ISA in the first place but was given an opportunity to correct that mistake at no cost

 

[dlockers]

Right. Exactly my point.

<tl;dr>

Why would you sign up for a product that has a limit below the average house price of where you are looking to buy?

I thought I was chancing it with Hertfordshire. I would have been smoking something to think it would be useful in London.

Edit: Your link is behind a paywall as well. GG on target audience for whinging about LISAs, lol.

 

[Bald-Eagle22]

Boom , here we go again .

Really surprised he’s done this but thanks Richi Rich , as a landlord you just boosted the price of all my 1 bed flats by ooo at least 5% , along with the stamp duty and CGT freeze it’s a win win for me .

Now witch one do I sell to make some serious Wonga ?

Joking aside even for me it’s just stupid now .

 

[dowie]

Pssst, the average price of a property in London is 500k. Shocker as someone is spending over the arbitrary 450k on the LISA scheme... And I live in zone 3. It's nice, and safe, but not fancy by any stretch of the imagination.

Average salary in London is rather high too - I'm not sure taxpayers need subsidize rich londoners!

It doesn't. But H2B does. So wait, are you saying it's "acceptable" for someone to buy a £599k property with H2B, just not with a LISA? Just want to be clear how you're trying to judge here. Thanks

No just the overall principle, one was clearly introduced after the other and you've got those different limits but my argument is more about the principle in general.

The problem with trying to get a mortgage in the South East/London with a 5% deposit is that the bank will only lend you up to a certain amount. With a 5% deposit you'd probably have to have two householders earning big 6 figures to get them to lend you enough for the average FTB property.

It's not a 5% deposit though it's going to have a government contribution to it too - I've not checked recently but banks do tend to go a bit beyond 3* income these days, some as high as nearly 5 times income. Either way I'm not sure many taxpayers are going to be too phased about the dilemma of someone who can't quite manage to get a half-million property! Worlds smallest violin and all that...

 

[Surveyor]

Oh and regarding misselling it's not my words; https://www.telegraph.co.uk/investi...bolish-lifetime-isa-says-new-treasury-report/ (I had a pdf of that previously, can't find it now)

The report accused the Government of not being “clear enough that those withdrawing their money early lose not only the 25pc bonus, but also a fraction of their capital”.

You can withdraw before 6 April and not lose any of your capital.

 

[Scam]

Why would you sign up for a product that has a limit below the average house price of where you are looking to buy?

Because funnily enough as a single FTB I was looking at properties below 450k. Why aren't you getting this?

Edit: Your link is behind a paywall as well. GG on target audience for whinging about LISAs, lol.

I'm not a subscriber, lol. Someone had posted a pdf of it somewhere, I just remember reading it before.

Average salary in London is rather high too - I'm not sure taxpayers need subsidize rich londoners!

But the average house price to salary ratio is actually the highest in the UK. So actually you're entirely wrong. If you're talking averages, the average Londoner pays more as a proportion of their salary on housing than anywhere else in the country.

It's not a 5% deposit though it's going to have a government contribution to it too

5 or 10% doesn't really make a difference. The bank's won't loan you enough.

You can withdraw before 6 April and not lose any of your capital.

I already said I'd be doing this. If that's the answer, why doesn't the government extend the penalty free withdrawals indefinitely? Everyone's circumstances change over time, and house prices always go up. Why punish people that are just trying to save sensibly?

 

[dlockers]

Because funnily enough as a single FTB I was looking at properties below 450k. Why aren't you getting this?

I think you need to learn a bit more about financial commitments before you buy a house, especially with another individual who may not be aware quite how "switched off" you are regarding commitments.

Be careful selecting a mortgage. A 5 year fixed sounds like a great way to lock in the low rate but you'll have a large penalty to leave early.

That also has consequences, and they are a lot less lenient than the government pandering to people who couldn't interpret the black and white of the LISA rules.

Guess what? Your stamp duty saving is a one off thing as well. You can't also whine to the government that you lost it because circumstances change and now you want a different property.

 

[dowie]

But the average house price to salary ratio is actually the highest in the UK. So actually you're entirely wrong. If you're talking averages, the average Londoner pays more as a proportion of their salary on housing than anywhere else in the country.

But I didn't specify that... I simply commented that the average Londoner earns more.

5 or 10% doesn't really make a difference. The bank's won't loan you enough.

Banks will typically loan up to circa 4.5 times income on mortgages so at the extreme end (lets say a 5% deposit and 600k property) that is a (joint) income of 126k or so - or 63k each... so doesn't require both partners to be on six figures... I could be done with one person on a (low) six-figure salary even, or just two people on much more modest incomes.

 

[grudas]

Me and my other half are both maxing out our Lisa each year.. think I've got 3k bonus already. The plan/max budget is literally up to 450k so we're okay.

I can see how London would be an issue but again the rules of it were there in the first place.

 

[mumihp]

It is not the deposit that is the issue. It is the fact, lender will only times your income by 4.5 or 4.75, it depends on the lender. Houses are too expensive and when you multiple the person income, they won't get enough mortgage to buy the house. The only way out of this is for the person to have a good deposit and that is years of saving. This scheme will only drive house prices up. Unless you have a very good income that will get you the house you want, this scheme will suit you but houses are too expensive, even with a joint income, you will be struggling to get a decent mortgage. Where I live, average 3 bed house ranges from £260k plus, so you would need atleast annual income of £55k per year to get a mortgage like that. The average salary is too low especially against home prices. One day, I will buy my own home, but its not possible right now so I will continue to save for a deposit.

 

[Scam]

I think you need to learn a bit more about financial commitments before you buy a house,

I think you need to stop with your holier than thou judgement on people without all of the facts available to you

How many times do I need to say I k we the rules fine, bit my circumstances have changed. That's the issue. God forbid one of these millions of youngsters working in hospitality was saving into a LISA and gets made redundant in April and needs the money. Should have read the rules, right?

But I didn't specify that... I simply commented that the average Londoner earns more.

But you were talking with respect to affordability.

I can see how London would be an issue but again the rules of it were there in the first place

How would you feel if your area experienced a surge in prices and put all of those prices up to 500k rather than 450k? It could happen, in fact it will over time anyway.

(snip) The average salary is too low especially against home prices.

Exactly.

 

[rG-tom]

It is not the deposit that is the issue. It is the fact, lender will only times your income by 4.5 or 4.75, it depends on the lender. Houses are too expensive and when you multiple the person income, they won't get enough mortgage to buy the house. The only way out of this is for the person to have a good deposit and that is years of saving. This scheme will only drive house prices up. Unless you have a very good income that will get you the house you want, this scheme will suit you but houses are too expensive, even with a joint income, you will be struggling to get a decent mortgage. Where I live, average 3 bed house ranges from £260k plus, so you would need atleast annual income of £55k per year to get a mortgage like that. The average salary is too low especially against home prices. One day, I will buy my own home, but its not possible right now so I will continue to save for a deposit.

So average 3 bed house £260k, which needs JOINT income of £55k for a 95% LTV 4.5x, puts it pretty much smack bang in the range of two average income people right? What am I missing from your numbers?

If you mean a single person on average income couldn't afford it, then I don't think it's that wrong that a single person on an average income can't afford a 3 bedroom house, but two people on the average salary can...

 

[dowie]

It is not the deposit that is the issue. It is the fact, lender will only times your income by 4.5 or 4.75, it depends on the lender. Houses are too expensive and when you multiple the person income, they won't get enough mortgage to buy the house.

If they're really too expensive then they'll fall.

They're already offering a deposit guarantee - and frankly, 4.75 times income is quite a hefty loan - I don't think we need to get into some much higher multiples tbh.. and surely if you think prices are an issue then that sort of thing would only serve to push prices up further. They're simply reflecting the supply of properties and the competition for it. We could build more homes of course, but that won't necessarily solve the issues of people who want to live in specific desirable areas of London or say Cornwall etc... so long as there are lots of people competing to live in a given area then you're just going to have to deal with that - either earn more/hustle your way to being able to afford it or accept reality and find some other place to live.

 

[HACO]

So average 3 bed house £260k, which needs JOINT income of £55k for a 95% LTV 4.5x, puts it pretty much smack bang in the range of two average income people right? What am I missing from your numbers?

If you mean a single person on average income couldn't afford it, then I don't think it's that wrong that a single person on an average income can't afford a 3 bedroom house, but two people on the average salary can...

They can, until one of them loses their job, develops health issues, has an accident, they have children that need extra care or anything else that removes them from the workforce.

The idea that only dual income households deserve to be homeowners is absurd, this is only the result of the last 15 years where wages remained stagnant and property prices more than doubled.

UK median price-to-income ratio is almost 10x now (London nearly 15x), so not affordable even for dual income households anymore.

 

[grudas]

How would you feel if your area experienced a surge in prices and put all of those prices up to 500k rather than 450k? It could happen, in fact it will over time anyway.

I'd be annoyed of course, I understand where you're coming from. All I'm saying is that there's always a gotcha of some kind with these schemes. They're not perfect but "free" money is free money if it works for you.

 

[dowie]

They can, until one of them loses their job, develops health issues, has an accident, they have children that need extra care or anything else that removes them from the workforce.

That doesn't necessarily stop them from affording it rather it just means that a bank won't actively look to lend in that situation... if the'yve already got a mortgage (and quite possibly some insurance) them meh..

The idea that only dual income households deserve to be homeowners is absurd, this is only the result of the last 15 years where wages remained stagnant and property prices more than doubled.

He didn't say that only dual-income households deserve to be homeowners though - he's referring to buying a 3 bedroom house on a dual income.

I think you'll find people complaining about house prices 15 years ago back in 2006 too - in fact some of them got their wish and saw a crash not long after.

If you don't like dual-income households then you'll need to go back a bit further than that and not have say women in the workplace so much... then perhaps house prices would instead be more in line with what a single breadwinner could afford.

 

[HACO]

He didn't say that only dual-income households deserve to be homeowners though - he's referring to buying a 3 bedroom house on a dual income.

£260k is median property price though, not a 3 bedroom house. To buy the median property, you need to be a dual income household.

I think you'll find people complaining about house prices 15 years ago back in 2006 too - in fact some of them got their wish and saw a crash not long after.

15 years ago price-to-income ratio was about 6.5x, now it's almost 10x. Last time it's been this high was 1875.

As for people getting their wish, a crash would have happened long ago if it wasn't for government interventions. Capitalism needs their boom/bust cycles and artificially avoiding/postponing a bust will only work for so long. We're following, to the letter, Japan's 1980s fiscal, monetary and housing policies in their attempt to postpone their bust cycle. We also know how that ended.

If you don't like dual-income households then you'll need to go back a bit further than that and not have say women in the workplace so much... then perhaps house prices would instead be more in line with what a single breadwinner could afford.

Or maybe, I know it's crazy, we should have built enough houses to keep up with increase in population and demand, so that the increase in productivity by more women working wouldn't go into the pockets of land owners and developers, and instead would go into the pockets of the people.

Again, it's absurd to celebrate women in the workforce, only to pay all that extra income for housing. Every family would be significantly wealthier if the cost of housing had only increased with inflation over the last 50 years. E.g. Singapore has a higher % of female labor force participation than the UK, with most of that progress happening in the last 20 years, their house prices didn't increase over the last 30 years above inflation.

After accounting for housing, the average dual income household now has less purchasing power than the average single income household 30 years ago. This is a return to Feudalism.

 

[BongoHunter]

I'm quite liking the look of this scheme - could be a real boon for us as we are looking for a second home and this scheme does not appear limited to first time buyers which is surprising tbh!